What is defined as a short-term unsecured loan to a corporation, typically issued at a discount from face value?

The correct answer is a short-term unsecured loan to a corporation typically issued at a discount from face value. This definition aligns with commercial paper, which is a popular financial instrument used by corporations to meet short-term funding needs.

Commercial paper is characterized by its short maturity period, which usually ranges from a few days to up to 270 days, and it is issued directly in the money market. Companies opt for this form of financing because it allows them to raise funds quickly without having to provide collateral. Instead of paying interest in the traditional sense, commercial paper is sold at a discount, so investors purchase it for less than its face value and receive the full amount upon maturity.

Tax anticipation notes, while also short-term instruments, are specifically issued by municipalities to cover expected tax revenues and do not fit the corporate loan description. Certificates of deposit are time deposits offered by banks, secured by the funds on deposit, and generally have longer terms. Mortgage-backed securities are investment products backed by a pool of real estate loans, which do not relate to unsecured loans to corporations.

Understanding these distinctions helps clarify why commercial paper is the best fit for the provided definition.